May 5, 1998
Mr. Thomas J. Jung
7644 S. Madison Circle
Littleton, Colorado 80112
Re: Options for Shares of Common Stock
Dear Mr. Jung:
As we discussed, in connection with your recent employment by Hallwood
Petroleum, Inc., Hallwood Consolidated Resources Corporation (the "Company")
hereby grants you, effective as of the date of this letter, an option (the
"Option") to acquire Nine Thousand Five Hundred Forty (9,540) shares of the
common stock of the Company.
Although your Option has not been granted pursuant to a previously existing
option plan, your Option will be subject to terms and conditions identical to
those in the Company's 1995 Share Option Plan (the "Option Plan"), and the
associated 1995 Share Option Plan Loan Program (the "Loan Program"). We have
enclosed copies of the Option Plan and the Loan Program for your reference and
review. The following is a description of the Option. Terms not otherwise
defined in this letter have the same meanings ascribed to them in the Option
Plan. You are referred to as the Optionee in the following description.
1. Option Price. The Option price is $15 3/4 for each Share.
2. Date of Grant. The Option is granted as of May 5, 1998 (the "Date of
Grant").
3. Exercise of Option. The Option shall be exercisable in whole or in part
in accordance with the provisions of the Option Plan as follows:
(i) Schedule of Rights to Exercise.
(a) 3180 Shares upon the Date of Grant,
(b) 3180 Shares after May 5, 1999,
(c) 3180 Shares after May 5, 2000,
or on such earlier date as the Option may vest in accordance with Section 7(d)
of the Option Plan, but subject always to the limits set forth in Section 7(e)
of the Option Plan.
(ii) Method of Exercise. The Option shall be exercisable by a written
notice delivered to the Company that shall:
(a) state the election to exercise the Option and the number of
Shares in respect of which it is being exercised; and
(b) be signed by the person or persons entitled to exercise the
Option and, if the Option is being exercised by any person or persons
other than the Optionee, be accompanied by proof, satisfactory to the
Company, of the right of such person or persons to exercise the
Option.
(iii) Payment. The exercise price of any Shares purchased shall be
paid solely in cash, by certified or cashier's check, by money order, with
Shares (provided that at the time of exercise the Committee in its sole
discretion does not prohibit the exercise of Options through the delivery
of Shares owned by the Optionee for at least six months) or by a
combination of the above; provided, however, that the Committee in its sole
discretion may accept a personal check in full or partial payment of any
Shares. If the exercise price is paid in whole or in part with Shares, the
value of the Shares surrendered shall be their Fair Market Value on the
date received by the Company. Any Shares delivered in satisfaction of all
or a portion of the exercise price shall be appropriately endorsed for
transfer and assignment to the Company.
(iv) Withholding. The Optionee shall make arrangements satisfactory to
the Company for the withholding of any amounts necessary for withholding in
accordance with applicable Federal or state income tax laws.
(v) Issuance of Shares. No person shall be, or have any of the rights
or privileges of, a Shareholder of the Company with respect to any of the
Shares subject to an Option unless and until certificates representing such
Shares shall have been issued and delivered to such person. As a condition
of any issuance of a certificate for Shares, the Committee may obtain such
agreements or undertakings, if any, as it may deem necessary or advisable
to assure compliance with any provision of the Plan, the agreement
evidencing the Option or any law or regulation including, but not limited
to, the following:
(a) A representation, warranty or agreement by the Optionee to
the Company at the time any Option is exercised that he is acquiring
the Shares to be issued to him for investment and not with a view to,
or for sale in connection with, the distribution of any such Shares;
and
(b) A representation, warranty or agreement to be bound by any
legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities laws
deemed by the Committee to be applicable to the issuance of the Shares
and are endorsed upon the Share certificates.
(vi) Surrender of Option. Upon exercise of Option in part, if
requested by the Company, the Optionee shall deliver Option and any other
written agreements executed by the Company and the Optionee with respect to
Option to the Company who shall endorse or cause to be endorsed thereon a
notation of such exercise and return all agreements to the Optionee.
4. Transferability of Option. In the Optionee's discretion, The Option may
be transferred by the Optionee by gift or by contribution to (a) any member of
Optionee's immediate family; (b) any entity of which Optionee or members of
Optionee's family are the sole equity owners or beneficiaries or, if there are
discretionary beneficiaries, among the class of discretionary beneficiaries; or
(c) any combination of the foregoing.
5. Term of Option. The Option may not be exercised after the expiration of
ten (10) years from the Date of Grant of the Option and is subject to earlier
termination as provided in Section 8 of the Plan. The Option may be exercised
during such term only in accordance with the Plan and the terms of the Option.
6. Administration. The Option shall be administered by the Committee
provided for and described in Section 13 of the Plan.
If this letter agreement correctly sets forth your understanding regarding
the Options, please acknowledge and accept the award by signing in the space
provided below.
Sincerely,
HALLWOOD CONSOLIDATED
RESOURCES CORPORATION
/s/Russell P. Meduna
Russell P. Meduna
Executive Vice President
I acknowledge receipt of the letter dated May 5, 1998 regarding the award
of a Share Option, a copy of the 1995 Option Plan and the Loan Program, and
represent that I am familiar with the terms and provisions thereof, and hereby
accept the Option subject to all the terms and provisions of this letter, the
Option Plan and the Loan Program. I hereby agree to accept as binding,
conclusive and final all decisions or interpretations of the Committee (as
defined in the Option Plan ) upon any questions arising under my Option.
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Date Thomas J. Jung